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Penny/Option Trading Recommendations

Hello, I see a lot of great advise on here and I figured I would start a thread with a few general questions I haven't been able to find answers for.

1) I realize most Penny Stocks are very volatile and make for horrible investments. Out of curiosity I started signing up for "Penny Stock" Newsletters and following the "Penny Picks" of the day. What stops somebody like me from buying the stock at the open and selling it after it goes up 10-25% (usually within the 10-30 min)?

Obviously it's not an investment strategy but I was wondering how and if people make profit from turning these stocks. That leads into my next question...

2) Is real-time trading software necessary for day trading? Is it possible to merely day trade with Limit Orders?

3) I'm approved for covered calls on my account. However, it seems that making profits on covered calls for stocks is limited without 1000+ shares. For example I would make maybe $20-$40 for a reasonable cover call for 100 shares. Is it wise to invest in companies you like with writing covered calls in mind? For example, if I can slowly build to 1000 shares is it unfeasible to write options on much of the stock hoping to pull maybe $200-$400 every couple months?

4) Does anybody write covered call for companies under $10? I'm just researching it but most of the stuff I read focuses on INTC or MSFT. Is it profitable to write covered calls for cheaper stocks or does the risk outweigh the fairly tiny reward?

5) Where do your best tips come from? Is it reading charts? "Insider" type information?

I feel like I have a grasp on the basics of investing, I'm just looking for tips to maximize possible profits and do a little penny gambling with some extra investment money. I'm thinking of joining SFB for the trial period but I'm not sure if it is right for me. I can generally pick strong companies to invest in long-term, but I'm just dipping my toes into short term investing.

I'm sorry to see you havent' gotten any responses here yet. I'm by no means an expert, but i'll tell you what i think i can.

1) what stops you from doing it? Probaby the lack of a daytrading account for one. Most brokers I've seen put either a limit on the number of times you can trade with the same money within a period of time (because technically it takes, i believe 3 days for a trade to completely clear), or have margin requirements to do so.

3)I'd say you're more correct on point 1, here, than #4. I actually have one position, that i have 100 shares in, that i'm writing as covered. Right now it's a far out (june expire) It still has a ways to plummet before it's a good investment for me though. The problem with small contracts is that a lot of any potential profit, is going to be eaten up in commissions.

1) I realize most Penny Stocks are very volatile and make for horrible investments. Out of curiosity I started signing up for "Penny Stock" Newsletters and following the "Penny Picks" of the day. What stops somebody like me from buying the stock at the open and selling it after it goes up 10-25% (usually within the 10-30 min)?

Not anything if you have the money in your account to do it. It takes 3 days for your sell to clear. You cannot make a profit on the stock you sell and then try to use that profit to buy other stock. It must settle first. If you have a margin account you can use those funds to buy more stock.

2) Is real-time trading software necessary for day trading? Is it possible to merely day trade with Limit Orders?

No I don't use anything but the plain and simple candle chart. Most of my buys and sells are on limit orders. I want the market to come down before I buy it, I want it to go up before I sell it.

cannot tell you a thing about question 3 or 4

5) Where do your best tips come from? Is it reading charts? "Insider" type information?

I get no tips I just look for the shares to take a dip and make money on the upswing. This may be just once during the day or many times. I buy in large volume and for each 10 cents a share the stocks goes up I make a hundred dollars. I usually trade LNKD and if you will look it moves in dollars where KO (coke) moves in cents. I don't do much in long term just day trade. Looking like everyone else for the big market correction as millions have been invested that are on margin. The market is over pumped.

1) Nothing stops you. But if it was really that simple, don't you think everybody would be doing it? I'm not afraid of penny stocks. I believe that as long as you're making your decision based on the proper research, then it doesn't matter if you're buying a 10 cent stock or a 10 dollar stock. However, the biggest risk with penny stock companies comes from the fact that it's often hard to find any "reliable" info on them. I would recommend you ignore newsletters and "picks". They're more likely to just be 'Pump & Dump Propaganda' rather than something which is overall helpful. Think about it. If a guy was such a genius that he could really make millions off of his penny stock picks, he wouldn't be publishing a free online newsletter to tell the whole world about it.

2) No, real-time software isn't necessary, but it can be helpful. Yes, you can day trade only with limit orders, but you'll also miss out on some spontaneous opportunities. By the way, you'll need $25k in your account before you can day trade.

1) Nothing stops you I guess but whether or not it goes up is a flip of the coin....newsletter or not.

2) I suppose you don't have to have all that....but some of the best trading platforms ever designed are free...why wouldn't you use every advantage you could get. Would you ride a mule in the Kentucky Derby? (see thinkorswim)

3) Covered call writing is an excellent longer term strategy. It reduces your cost basis as well as generating monthly income. A stock like WEN gives a pretty steady quarterly dividend and monthly out of the money call sells can generate another 2+% per month. Overall that's a pretty good yearly return. Just an example.

4) You can write for whatever you want. I've done 7$ stocks that had insane Implied Volatility to get the huge premium...which in turn saved my ass when the underlying dropped 30% allowing me to buy them back and sell them again when the stock spiked back up again. I was prepared to sell calls on that thing until it was profitable but the stock ended up shooting through the roof so it all worked out. I've sold and bought back calls two or three times in the same month because the stock jumped around so much. Like ARIA and CHTP are a couple of the cheaper ones i've done that with...but they were highly volatile which is why the premium was so good at the time.

5) Everything you can know....is already known by someone else with a lot more money. Personally I make the assumption that the markets are priced efficiently and then use option spreads to trade the volatility and time decay. For every expert opinion you can probably find another expert with an opposite opinion. The important thing is to get engaged...if you need charts or insider info to give you the confidence to make a decision and carry it through to completion then use whatever makes you feel like you are getting somewhere. But don't feel like you have to pay to get that confidence. In the end I think confidence is what matters...since markets are cyclical it will always favor the person with the biggest balls...the one who can stick to the game plan like a machine.

But there are better ways to make big plays with little money than penny stocks...with far less risk. A lot of the OTC and Pink Sheet markets are very inefficient...just not enough going on there to protect yourself. Don't feel like you have to throw your money in that kind of stuff. See "option spreads".
Good Luck